Most of the APMs that have been implemented to date have failed to achieve significant savings or improvements in quality, while imposing
significant administrative burdens and financial risks on the participants. Current APMs aren't successful because they don't actually fix the
problems with current fee-for-service payment systems. Simply increasing financial risk for physicians, hospitals, and other healthcare
providers in badly-designed payment models has the potential to harm patients, force good providers out of the healthcare system, and cause prices and spending to increase.

Fortunately, there are better ways to create APMs so they can be a win-win-win for patients, providers, and patients. How to
Create an Alternative Payment Model provides a step-by-step guide to designing and implementing APMs that can result in lower healthcare
spending without harming patients or bankrupting healthcare providers.

The report provides the most comprehensive description available anywhere regarding:

the major opportunities that exist for reducing spending and improving quality and the corresponding changes in care delivery that APMs should be designed to support;

how to estimate the costs of delivering care in better, more efficient ways and how to determine whether there is a business case for an APM;

the specific ways that current payment systems and benefit structures can be modified to support and sustain the delivery of high-value services;

methods for holding physicians, hospitals, and other healthcare providers accountable for utilization and spending in ways that are feasible for them both clinically and financially;

how to ensure that patients are not harmed by the changes in care delivery and the financial incentives in the APM;

the ways that both payers and providers can easily operationalize APMs using their existing billing and claims payment systems;

how to encourage payers, providers, and patients to participate in well-designed APMs; and

how APMs can be used to support a competitive marketplace for healthcare services that will stimulate innovation in both quality and efficiency.

In addition to the full report, an Executive Summary is available,
as well as three detailed designs for Alternative Payment Models focused on specific conditions:

A Maternity Care APM that can
reduce spending and improve outcomes by enabling more women to deliver babies in birth centers rather than hospitals,
reducing the frequency of Cesarean sections in low-risk births, supporting more extensive prenatal and postpartum
care services for higher-risk women, and tying payments directly to outcomes.

A Chronic Condition APM that would reduce spending and
improve outcomes by reducing the rates of avoidable emergency departament visits and hospital admissions for patients
with chronic conditions and by reducing the utilization of unnecessary medications, tests, and other services
in the delivery of their care.

A Care Management APM
that would reduce spending and
improve outcomes by reducing the rate of avoidable hospital admissions for patients with chronic conditons.

The most important element of a truly "value-based" healthcare system is strong primary care. Unfortunately, the U.S.
primary care system is at risk of collapse. Although there are multiple causes for this, a major reason is the
failure of the current payment system to provide adequate resources to support high-quality primary care services.

In April 2019, the Centers for Medicare and Medicaid Services (CMS) announced a new payment demonstration called "Primary Care First" in order to "transform primary care
to deliver better value for patients throughout the healthcare system." However, this initiative is likely to fall far short
of what is needed to fully address the problems facing primary care and to successfully sustain a high-value primary care system.

The Problems with "Primary Care First" and How to Fix Them describes nine major problems with Primary Care First that prevent it from creating the kind of payment system that small primary care practices need in order to deliver high-quality care to their
patients and stay afloat financially. It also describes the changes in Primary Care First that would enable CMS to create the kind of payment model that smaller primary care practices have been seeking.

There is broad consensus that Alternative Payment Models (APMs) are needed to reduce healthcare spending and improve the quality of care for patients. However, the ability
of an APM to generate savings and improve quality depends on whether it corrects the problems in
current fee-for-service payment systems while also preserving the strengths of those systems.

Unfortunately, the APMs implemented by the Centers for Medicare and Medicaid Services (CMS) fail to achieve either
of these goals.
The Problems with Medicare's Alternative Payment Models and How to Fix Them provides detailed descriptions of the six major Advanced APMs in Medicare (Bundled Payments for Care
Improvement Advanced, Comprehensive Care for Joint Replacement, Comprehensive ESRD Care, Comprehensive Primary Care Plus, the Medicare Shared Savings Program, and the Oncology
Care Model) and shows that each of these APMs fails to meet the majority of the eight criteria for a successful APM.

Rather than generating savings as hoped, the Medicare Shared Savings Program (MSSP) has created losses for the Medicare program for four years in a row.
Would requiring Accountable Care Organizations (ACOs) in the program to take "downside risk" solve the problems?

How to Fix the Medicare Shared Savings Program shows that Medicare actually spends more per beneficiary in the downside-risk ACOs, with no difference
in the quality of care. Moreover, ACOs that have moved to the downside risk tracks have saved less after doing so.

The report describes how the risk adjustment system used in the program can penalize ACOs with higher-need patients.
Concerns about these and other problems in the benchmarking and attribution methodologies used in the program have made most ACOs unwilling to enter
the downside risk tracks and have discouraged many healthcare providers from participating even in the upside-only tracks. Requiring all ACOs to accept downside risk could cause many current ACOs to leave the program.

How to Fix the Medicare Shared Savings Program describes four other options for modifying the program that would increase Medicare savings without requiring
ACOs to take on risk for total Medicare spending. However, the report also explains how the program fails to address the real problems with current
fee-for-service payment systems and why it is unlikely to ever result in significant savings or improvements in quality.

Health insurance will never be affordable unless the cost of health care is reduced. Although there is
broad agreement that fee-for-service payment is a major reason why healthcare spending continues to grow faster than inflation,
most of the "value-based payment" and "value-based purchasing" reforms implemented to date have shown little benefit.
Why
Value-Based Payment Isn't Working, and How to Fix It explains why pay-for-performance, shared savings,
two-sided risk, population-based payments, and narrow networks have failed to either control healthcare costs or
improve the quality of care, while creating heavy administrative burdens for providers and financial incentives to deny the care patients need.
The report shows why simply increasing the financial risk for healthcare providers under current value-based payment
models will likely make things worse, not better.

Why
Value-Based Payment Isn't Working, and How to Fix It
details four separate problems with fee-for-service that need to be addressed, but it also describes four strengths
of fee-for-service payment that need to be preserved. Current "value-based payment" programs are failing not only because
they don't solve the problems with fee-for-service payment but because they don't preserve its strengths.
The fact that a payment system is different does not mean that it is better. Resistance by physicians,
hospitals, and other providers to implementing current payment "reforms" has been inappropriately interpreted
as unwillingness to change, rather than refusal to support a cure that may be worse than the disease.

Fortunately, there is a better way. Why
Value-Based Payment Isn't Working, and How to Fix It
describes how to create a patient-centered payment system that can solve the problems with the current fee-for-service payment
system while preserving its strengths. The Patient-Centered Payment system described in the report would:

Enable patients to have their specific healthcare needs addressed by teams of providers that have agreed to work together to achieve specific, feasible outcomes for that need;

Enable patients to select which provider team to use based on the quality standards and outcomes that each provider team commits to achieve for that patient and based on the total amount that the patient and their insurer will pay for all of the services the patient will receive with respect to the need that is being addressed;

Give the team of providers adequate resources and sufficient flexibility to deliver the most appropriate combination of high-quality services to achieve the best outcomes based on the nature and severity of the patient's need; and

Hold the team of providers accountable for meeting quality standards and achieving the expected results for each patient in return for the adequate, flexible payment.

Patient-Centered Payment supports patient-centered care, which is what patients want to receive and what
physicians and other healthcare providers want to deliver. But unlike current "value-based payment" models,
Patient-Centered Payment also requires the kind of accountability for cost and quality that both patients and
purchasers need and that is feasible for providers to accept. Moreover, unlike current "value-based payment"
systems that rely on regulatory structures to set prices and define quality standards, Patient-Centered Payment
supports a market-based approach to improving quality and controlling costs.

Both the full report
and the Executive Summary
describe the four strengths and four weaknesses of fee-for-service, show why current payment reforms are failing,
and describe the key elements of a Patient-Centered Payment system. The full report provides detailed examples of
the problems with current "value-based payment" systems and also detailed examples of how a Patient-Centered Payment
system would improve preventive care, improve diagnosis, improve care for acute conditions, and improve care for patients
with chronic disease. It also explains and provides detailed examples of how healthcare spending can be reduced
without harming patients, physicians, or hospitals.

A Guide to Physician-Focused Payment Models
describes seven different Alternative Payment Models (APMs) that can enable physicians in every specialty to redesign the way they deliver care in order to control spending and improve quality for their patients:.

APM #1. Payment for a High-Value Service

APM #2. Condition-Based Payment for Physician Services

APM #3. Multi-Physician Bundled Payment

APM #4. Physician-Facility Procedure Bundle

APM #5. Warrantied Payment for Physician Services

APM #6. Episode Payment for a Procedure

APM #7. Condition-Based Payment

The seven APMs described in the report would be able to meet the eligibility criteria for Alternative Payment Models specified in
the Medicare Access and CHIP Reauthorization Act (MACRA). Under each of the APMs described in the report, physicians would take accountability for
specific aspects of spending and quality they can control or influence. However, the APMs would not place physicians at financial
risk for costs they cannot control, unlike a number of shared savings payment models that have been developed by payers. Moreover,
each of the APMs in this report would give the participating physicians the resources and flexibility they need to redesign care
so they can successfully control spending and improve quality for the types of patients and services for which they would be accountable.

Each of the APMs described in A Guide to Physician-Focused Alternative Payment Models addresses a different set of opportunities for savings and different
barriers in the current payment system. The report explains how the specific components of each APM would be structured to
work successfully for both physicians and payers. The report also describes nineteen different examples of how the APMs
could be applied to different types of patients, conditions, and procedures, including cancer care, cardiovascular care,
chronic disease management, emergency medicine, gastroenterology, maternity care, and surgery.

One of the barriers to reaching consensus on significant payment reforms has been the complex and
confusing array of terminology that has been used to describe different payment systems. It is difficult
for stakeholders to determine whether to support a proposal if they do not understand the words
and abbreviations used to describe it, and it is difficult to reach agreement when the same words
are used by different people to mean different things or when words are perceived by some stakeholder to
mean something different than what was actually intended.

The Payment Reform Glossary is
designed to facilitate a better understanding of payment reform concepts and to create a foundation for a common language
for developing and discussing payment reform concepts so they can be supported and implemented
by all stakeholders -- patients, providers, employers, health plans, and government agencies.

In addition to providing definitions, the Glossary attempts to explain many of the
most important words and phrases in enough detail that patients, providers, purchasers, and policy-makers can understand
the advantages and disadvantages of different payment models and the rationale for including various components of
payment models that might otherwise seem to make them unnecessarily complex.

Because there is not just one "fee-for-service payment system" but more than a dozen
different systems for different types of providers, each with their own unique structures
and their own unique strengths and weaknesses, The Payment Reform Glossary provides a basic description of the major payment systems used today to pay physicians, hospitals, and other providers.

The Payment Reform Glossary also provides descriptions of many of the most significant payment reform models that have been proposed or implemented by public and private payers.

A unique feature of The Payment Reform Glossary is that explicit comparisons and contrasts among key concepts are provided in highlighted sections of the Glossary.

Evaluation and Management Services payments penalize physicians for spending extra time to
determine an appropriate diagnosis for a patient or to choose appropriate diagnostic tests;

Specialists receive no payment from Medicare or most commercial payers for time spent
helping primary care physicians to determine an accurate diagnosis or to determine the appropriate tests
or referrals needed to do so;

Providers are paid for treatments even if the diagnosis is later determined to be inaccurate; and

The federal government has set a goal of moving 50% of Medicare payments into "Alternative Payment Models" by the end of 2018, and
Congress passed legislation in April authorizing higher payments for physicians who receive at least 25% of their revenues from Alternative
Payment Models by 2019.

Although a number of Alternative Payment Models have been developed for primary care physicians and physicians who peform hospital-based procedures,
there has been little progress in creating Alternative Payment Models for the majority of specialists. Moreover, most Alternative Payment Models to date
have consisted of shared savings programs or pay-for-performance systems that fail to solve the fundamental problems with fee for service payment.

Cancer care is an area where significant payment reforms are badly needed. National spending on cancer care has doubled in the past decade and is
projected to exceed $150 billion by 2020. There are many opportunities to reduce the cost of cancer treatment without harming patients, but the current payment system
doesn't adequately support the highest-quality, most appropriate care for patients.

A Better Way to Pay for Cancer Care
describes a new Alternative Payment Model for cancer care that is designed to fix many of the problems with the current payment system. Patient-Centered Oncology Payment (PCOP) would be a win-win-win for patients, payers, and oncology practices
by providing significantly higher payments to oncology practices to support improved services for patients, while producing net savings in total cancer spending
for payers by eliminating unnecessary or undesirable services for patients.

Additional information about Patient-Centered Oncology Payment and ways to improve cancer payment is available at www.CancerPayment.org.

There is growing national recognition that most pay-for-performance and "value-based purchasing" systems
fail to adequately solve the serious problems with the fee-for-service payment system and that fundamentally different ways of
paying for health care are needed in order to improve quality and control costs. The U.S. Department of Health and Human Services has
announced a goal of moving 50% of Medicare payments into "alternative payment models" by 2018, and legislation repealing the flawed
Sustainable Growth Rate formula includes provisions encouraging physicians to participate in "alternative payment models."

However, the devil is in the details: How do you actually design an "alternative payment model" that supports better care for
patients and lower spending for payers without putting physician practices and hospitals out of business or exposing them to
inappropriate financial risk?

Sufficient flexibility in care delivery so that healthcare providers can deliver high quality, affordable services that are
matched to the unique needs of individual patients;

Appropriate accountability for spending to assure purchasers that healthcare will be more affordable than under the current payment system;

Appropriate accountability for quality to assure both patients and purchasers that the quality of care will be maintained or improved; and

Adequacy of payment to cover the costs of delivering high-quality, efficient care to the types of patients that providers see.

The report explains the four essential building blocks that must be included in an alternative payment model to successfully achieve
these goals. It also describes multiple options for creating each of those building blocks so that payment models can be customized to the
needs and capabilities of different payers and providers, and it shows how to enable providers and payers to transition to more accountable payment
models over time.

Some of the key issues addressed in the report include:

Why "incentives," "shared savings," and other current approaches to payment reform do not address the real problems with the
fee-for-service system;

The different ways in which services and providers can be "bundled" to create greater flexibility and efficiency in care delivery;

How healthcare providers can be held accountable for the aspects of costs and quality they can control without putting them at risk
for things they cannot control;

The differences between global payments, global budgets, population-based payments, and shared savings payments and their advantages
and disadvantages;

The differences between risk adjustment/stratification, risk corridors, and outlier payments and the important roles they each play
in an effective payment system;

How payments can be adjusted to match changes in providers' costs when the volume of services changes and as technology evolves;

Whether prospective designation or retrospective attribution is a better way of designating the healthcare provider who should be accountable for cost and quality;

How individual physicians and other healthcare providers can be compensated for services delivered as part of bundled or global
payments;

Why properly-designed payment models do not need to be "tested" before being implemented and why such testing can often be
counter-productive.

The Building Blocks of Successful Payment Reform complements another report from CHQPR, Making the
Business Case for Payment and Delivery Reform, that provides a step-by-step guide to help businesses, physicians, hospitals, and
other purchasers and providers carry out the financial analyses needed to design the kinds of payment systems described in the Building Blocks report.

In order to support improvements in both healthcare delivery and payment systems, individuals and organizations that purchase healthcare services
need a clear business case showing that the proposed change in care will achieve sufficient benefits to justify whatever change in payment
healthcare providers need to support the change in care. Healthcare providers also need a clear business case showing that they will be able to
successfully deliver high-quality care in a financially sustainable way.

Making the Business Case for Payment and Delivery Reform describes a ten-step process
to develop such a business case, and provides a detailed example for how to apply the process to an initiative to improve management of chronic
disease patients. The report also describes the types of data that are needed to carry out all of the steps in a good business case analysis.

The federal government, commercial health plans, and other organizations are increasingly using measures of healthcare spending for the purposes
of rewarding or penalizing physicians, hospitals, and other healthcare providers, defining provider networks, and encouraging patients to use particular providers.
Measuring and Assigning Accountability for Healthcare Spending describes six fundamental problems with the current attribution and risk
adjustment systems that are being used in these measures and explains how these problems could seriously harm both patients and healthcare providers.

For example, the report shows how the spending measures currently being used in "value-based purchasing" programs can:

Inappropriately assign accountability to physicians and hospitals for services they did not deliver and cannot control, while at the same time
failing to hold healthcare providers accountable for most of the services they do deliver;

Financially penalize physicians and hospitals who care for patients with complex problems and who deliver evidence-based services to their patients;

Fail to provide physicians, hospitals, and other providers the kind of actionable information they need to identify opportunities to control healthcare spending
without harming patients; and

Measuring and Assigning Accountability for Healthcare Spending also describes how these
problems can be solved. The report presents a detailed methodology for assigning accountability to healthcare providers for the services they actually
can control or influence and for identifying which aspects of those services might be changed in order to achieve the same or better outcomes for
patients at lower cost. In addition, methods are described for comparing services and spending for patients with similar needs. The report shows how
these improved methodologies can use existing data to produce more valid, reliable, comprehensive, and actionable measures than those commonly used today. The report
also describes how more actionable measures of spending can help payers and providers move more quickly to true payment reforms such as bundled payments,
warranties, condition-based payments, and global payments.

A 7-page Executive Summary of the report is also available. It summarizes the six fundamental problems with current approaches and the improved method of measuring spending, and gives a
detailed example of how the improved methodology would provide more actionable infomation for a hypothetical patient.

The federal "Sustainable Growth Rate" law requires draconian cuts to Medicare physician payments that could force physician practices out of business,
make it difficult for Medicare beneficiaries to obtain care, and shift Medicare costs to workers and private businesses. How Should Congress Pay for the Cost of Repealing the Sustainable Growth Rate?
describes how Congress can pay for repealing the Sustainable Growth Rate (SGR) law without cutting physician payments in other ways, cutting payments to other
healthcare providers, refusing to pay for services Medicare beneficiaries need, or making cuts in other federal programs. The report shows how
changing the way Medicare pays for healthcare services can enable physicians to change the way they deliver care, enabling patients to get better care
with less total spending.

How significant savings in Medicare spending can be achieved by giving physicians the tools they need to keep patients healthy, avoid unnecessary
tests and procedures, reduce avoidable hospitalizations, and prevent infections and complications;

How current fee-for-service payment systems create barriers to implementing these improvements in care, and why current Medicare payment reforms
fail to remove these barriers;

How Accountable Payment Models can be designed to give physicians the flexibility they need to redesign care and to enable them to take
accountability for the costs and quality of the services they control or influence; and

How Congress could accelerate implementation of Accountable Payment Models to improve care for patients and achieve significant savings for the Medicare program and
for private payers.

There is growing national concern that consolidations of healthcare providers are leading to higher prices for healthcare services.
However, most policy prescriptions for how to address this fail to recognize three key points:

The healthcare payment system is the biggest barrier to better healthcare delivery

The price and utilization of healthcare are closely linked

The Best Antidote to Provider Market Power is to Change the Healthcare Payment System describes how current
payment systems don't pay hospitals and doctors for what we really want them to do, how most current
payment reforms make the problem worse, not better, and how true payment reform can
enable healthcare providers to deliver higher quality care at lower costs and
allow consumer choice to drive prices lower without the need for narrow networks or
price regulation.

There is widespread agreement that significant changes are needed in the way healthcare providers are paid if the nation is going to successfully control
the rapid growth in healthcare costs and improve the quality of care for patients. However, progress has been slow in implementing payment reforms because there
are many significant barriers to changing payment systems that have been in place for decades.

Fortunately, although the barriers to payment reform can seem daunting, they can be overcome.
Ten Barriers to Healthcare Payment Reform and How to Overcome Them describes many of
the biggest barriers that physicians, hospitals, health plans, employers, and policy-makers are facing in implementing payment reforms, along with strategies for solving
them. For example, the report describes:

How "shared savings" payment models can actually be a barrier to significant changes in care delivery because they make no real changes to the fee-for service system, and how only true payment reforms, such as episode-of-care payments, condition-specific comprehensive care payments, and global payments can allow win-win-win approaches for providers, payers, and patients.

The ways that payment systems can be structured to give providers accountability for the types of services and costs they can control, but protect them from risks associated with costs they cannot control.

How payment reforms and Accountable Care Organizations are unlikely to be successful unless physician compensation systems are also changed to reward value instead of volume.

Why lack of access to data on utilization and costs can prevent healthcare providers from offering to deliver care in ways that will save money for employers, Medicaid, Medicare, and health plans, and ways that better data and analysis can be made available to support successful payment reform.

The ways that health plan benefit designs as well as payment systems need to be changed so that patients have the ability and incentive to work with physicians and other healthcare providers to improve quality and reduce costs.

The need for more comprehensive, outcome-based measures of quality to accompany payment systems that are designed to control costs.

The importance of having all payers using common approaches to payment reform, and the specific strategies that can be used to encourage and facilitate alignment of payment systems in a community.

The unique challenges hospitals will face as part of efforts to reduce costs, and the kinds of actions both hospitals and payers can take to address those challenges.

How regulatory, accreditation, and payment policies favor large provider organizations in ways that can lead to higher costs, and the policy changes that are needed to foster more effective competition among providers.

The need for community mechanisms to ensure there is coordinated action in all of these areas, and the important role that Regional Health Improvement Collaboratives can play in supporting implementation of needed payment and delivery reforms.

Private businesses and federal and state governments could save billions of dollars if the quality of maternity care were improved, based on data
in The Cost of Having a Baby,
a new report developed jointly by Childbirth Connection, the Center for Healthcare Quality and Payment Reform, and Catalyst for Payment Reform. The report shows that the
high proportion of babies delivered by Cesarean section costs commercial insurance plans and state/federal Medicaid programs thousands of dollars more per
birth than vaginal births and the differences in costs is growing over time. The report also shows there is significant variation in costs within and
aross states for each type of birth, indicating that there are additional opportunities for savings.

Maternal and newborn care together represent the largest single category of hospital expenditures for most commercial health plans and state Medicaid programs,
so reducing maternity care costs provides a major opportunity to reduce insurance premiums for employers and to make Medicaid coverage more affordable for taxpayers.
There are many examples of physicians, midwives, hospitals, and birth centers around the country that are reducing maternity care costs in ways that improve quality and
outcomes for both mothers and babies, a win-win for both payers and patients.

However, a major barrier to changes in care delivery is the current healthcare payment system. Changes in payment systems are needed to support maternity care based
on achieving good outcomes for mothers and babies, rather than the specific procedures and services delivered. For example, the condition-specific payments described
in CHQPR's report Transitioning to Accountable Care, would provide the kind of flexibility and
accountability maternity care providers need to redesign care. More information on payment reform and delivery redesign opportunities in maternity care are available
from CHQPR's Maternity Care webpage.

There is growing agreement that many of the cost and quality problems in health care today are either caused
by or exacerbated by the way we pay for healthcare services. Although a variety of payment reforms have been
proposed to address these gaps, many of them are seen as either doing too little to address the problems caused
by current payment systems or as changing payment too radically for most healthcare providers to easily implement.

There is clearly a need for "middle-ground" options - payment reforms that provide greater flexibility and
accountability for the costs and quality of care than typical pay-for-performance, shared savings, and medical
home programs, but which avoid forcing providers, particularly small physician practices, to take on more financial
risk than they can manage or to take accountability for services they cannot effectively control (as traditional
capitation systems or full episode-of-care payment systems can require).

Transitioning to Accountable Care: Incremental Payment
Reforms to Support Higher Quality, More Affordable Health Care describes a range of transitional payment reforms
that can enable primary care practices, specialists, and hospitals to deliver significant improvements in cost
and quality for payers and patients as they build the capacity to transition to more comprehensive payment reforms. The
report also discusses a series of important issues in the design of any new payment system, including pricing, establishing
appropriate limits on risk, and ensuring quality. It also discusses the importance of alignment among multiple
payers and ways to achieve that, including ways that the Medicare program can best support payment reform efforts.

(You may need to have Adobe Acrobat Reader 8.0 or higher to download the full report. If you have difficulty downloading the report, please email us at: info@chqpr.org.)

The federal Patient Protection and Affordable Care Act created a new Medicare payment program to support Accountable Care Organizations (ACOs). Although the program is titled
the "Shared Savings Program," and most discussions have focused on using "shared savings" to pay ACOs, the Act allows CMS to use payment models other than shared savings to support ACOs.
One of these payment models is "partial capitation." The law states that under partial capitation payment, an ACO would be at financial risk for some, but not all, of the items and
services Medicare covers.

In light of the high and rapidly growing cost of healthcare in the U.S., there has been growing interest both in the federal government and in
states and regions across the country in finding ways to encourage health care providers to take greater accountability for the
overall cost as well as the quality of healthcare delivered to patients. A healthcare provider or group of providers that accepts accountability for the total cost of care
received by a population of patients has been termed an "Accountable Care Organization."

Although there has been growing support for creating such Accountable Care Organizations (ACOs), there has been relatively little exploration of how an ACO would actually
achieve the goals envisioned for it, what it would look like organizationally, or how it would come into existence. How to Create Accountable Care Organizations attempts to
fill this gap.

The report addresses key issues such as:

what an Accountable Care Organization should be accountable for, and the likely strategies it would use in order to be successful;

the types of healthcare providers that can and should be included in an Accountable Care Organization, which organizational structures would support success in
managing the desired accountability, and which organizational characteristics might present barriers to success;

the changes in healthcare payment systems which would need to be made in order to encourage and support the creation and operation of Accountable Care Organizations;

what governments and communities can and should do beyond payment reforms to create an environment that encourages the formation and successful operation of
Accountable Care Organizations; and

Across the country, there is growing recognition that dramatic changes in healthcare payment systems are needed in order to solve the
persistent problems in quality that plague healthcare delivery and to reduce unaffordable costs. Paths to Payment Reform, a new series of policy briefs
from the Center for Healthcare Quality and Payment Reform, is designed to explain some of the specific issues which need to be addressed in creating new
payment systems and ways to transition to them from current payment structures. The first five briefs are described below.

Is Shared Savings the Way to Reform Payment?

There is growing interest in using "shared savings" as an approach to healthcare payment reform. Medicare has used it as the key element of its
Physician Group Practice Demonstration, and it has been proposed as the key mechanism for encouraging the creation of "accountable care organizations."

Unfortunately, there are some fundamental weaknessess in the shared savings approach that make it far less desirable as a payment reform than it might first
appear: it doesn't really fix the underlying problems in the payment system; it gives providers risk without resources; it rewards high spenders rather than high
performers; it may or may not keep a provider from suffering financial losses; and it's not sustainable as a payment reform.

This policy brief explains the weaknesses in more detail, and describes the right way to share savings as part of an effort to reform healthcare
payment systems. Download the Policy Brief.

Which Healthcare Payment System is Best?

There is broad agreement that significant reforms are needed to the Fee-for-Service Payment systems that are commonly used today. The two major healthcare
payment systems being discussed as alternatives are Episode Payments and Comprehensive Care Payment
(also called condition-adjusted capitation or risk-adjusted global fees).

However, trying to weigh the pros & cons and pick the "best" payment method is a flawed
approach - Episode Payments are better for certain kinds of conditions and patients, and Comprehensive Care Payments are better for others. The choice depends
on the nature of the cost/quality problems to be solved.

This policy brief outlines two key dimensions of healthcare cost problems, and shows how they are addressed by the two different payment systems. Examples of the kinds of
healthcare conditions appropriate for each type of payment system are also defined, including situations in which both can be used jointly. Download the Policy Brief.

Transitioning to Comprehensive Care Payment

One option for improving healthcare quality and controlling costs is to use some form of population-based payment instead of Fee-for-Service payments. There are a
variety of different names for this - "Comprehensive Care Payment," "Condition-Adjusted Capitation," or "Risk-Adjusted Global Fee" - but the core element is paying
a single price for all of the healthcare services needed by a group of people for a fixed period of time.

However, since Comprehensive Care Payment represents a dramatic change in the way most healthcare providers are paid, it is unclear how many providers could manage
under such a payment system. Also, there are concerns about whether Comprehensive Care Payment can work successfully without causing financial difficulties for
providers and resistance from patients.

This policy brief outlines six ways that Comprehensive Care Payments need to be structured in order to avoid the problems that traditional capitation
payment systems caused. It also defines several potential levels of Partial Comprehensive Care Payments that could help smaller physician practices to transition
into this type of payment system. Download the Policy Brief.

Using Medical Homes to Reduce Readmissions

Many people are convinced that the only way to significantly reduce healthcare costs is by some type of rationing, i.e., limiting the kinds of
services that Medicare or health insurance will pay for. But there are ways to significantly reduce healthcare spending without taking away anything that
consumers want.

A perfect example is hospital readmissions. Research studies and quality-reporting initiatives around the country show that 15-25% of people who are
discharged from the hospital will be readmitted to the hospital within 30 days or less, and that many of these readmissions are preventable.

A number of proposals have surfaced for reducing preventable readmissions by reducing or eliminating payments to hospitals when these readmissions
occur. The problem with this approach is that it assumes that if a readmission is preventable, it is preventable by the hospital, and that is not always
the case.

As outlined in this policy brief, the Patient-Centered Medical Home can help to prevent many readmissions, if it is paid in the right way and focuses on
reducing readmissions. Download the Policy Brief.

Transitioning to Episode-Based Payment

There is growing interest in using episode payments instead of fee-for-service payments as way of improving healthcare quality and controlling costs.
An "episode payment" is a single price for all of the services needed by a patient for an entire episode of care (e.g., all of the inpatient and outpatient
care they need after having a heart attack). An episode payment system reduces the incentive to overuse unnecessary services within the episode, and gives
healthcare providers the flexibility to decide what services should be delivered, rather than being constrained by fee codes and amounts.

The devil is in the details, however: What exactly would be included in an episode payment? And how can healthcare payers and providers transition from
the current fee-for-service system to an episode payment structure?

This policy brief describes how to define an episode payment and how to transition to episode payment.
Download the Policy Brief.

Setting Payment Levels

Most discussions about healthcare payment reform focus on different methods of paying providers - fee-for-service payments, episode payments, capitation
payments, etc. Different payment methods have advantages and disadvantages, but choosing the payment method is only half of the challenge in reforming payment systems.
The other half is choosing the right amount of payment. Even if the payment method provides the right incentives, if the payment level is too low
(i.e., below the minimum cost of providing care), providers will be unable to provide quality care, and if the payment level is too high, there is no
incentive for efficiency.

So how should payment levels (i.e., prices) be set? This policy brief describes the three different methods for setting prices, and some of the
advantages and disadvantages of each. Download the Policy Brief.